Customer Intelligence – Analyzing and Acting on the Data

bubble cloudsPart one of this topic addressed leveraging social media to improve customer satisfaction.  This is the initial step towards a broader goal to create a robust Customer Intelligence framework that allows P/C insurers to listen, connect, analyze, respond and market to customers in a much more proactive and targeted way.

Customer Intelligence is the process of collecting relevant and timely information about customers and prospects, consolidating the data from all the different sources into a cohesive structure, and providing the sales, service and marketing functions with tools that can leverage this intelligence.  The sources of this data not only include the obvious ones such as a carrier’s Customer Service Center, and Policy or Claims Admin system, but should also originate from the Agent, Marketing Surveys, Telematics, and Social Media, including Twitter and Facebook – all mashed up to produce a Balanced Scorecard and Predictive Analytics.

Most CRM systems need to be updated to include new columns in their user profile for data in addition to email and phone number such as Facebook name, Twitter Handle, etc. With the social listening and response management connected to your CRM, a social inquiry can be viewed in context and the activity recorded for future interactions, available to Customer Service Reps or even Agency personnel. This level of social customer intelligence is going to differentiate companies that do it right, becoming a key element of a carrier’s business strategy.

A fully integrated Customer Intelligence platform provides benefits such as:

  • A single integrated interface to many social media outlets
  • The ability to manage multiple writing companies
  • Create and track cases, contacts, accounts, and leads from real-time conversations
  • Manage marketing campaigns and track social media marketing ROI
  • Cue CSR’s on upsell and cross sell opportunities

A carrier should determine the Key Performance Indicators (KPIs) that matter most to their business goals, then view the appropriate data in graphical dashboards to track effectiveness of their efforts.  It’s important to tie those KPIs to their influence on customer behaviors such as loyalty and increased sales.  But carriers must also be aware to not look at positive or negative changes in the wrong way and fully understand the reasons for success or failure.  Reacting to success by following up with more online advertising in certain media outlets, may not produce the desired results, when in fact the reason for an increase in sales is due to the upsell and cross sell efforts of CSRs.

Usage Based Insurance – Who are carriers’ target audience and who will be left?

usage based insuranceUnless you live totally off the grid, you have seen a commercial for Progressive’s Snapshot program.   Progressive and other major carriers are offering and forcefully marketing usage based insurance (UBI) to their customers.   The idea behind usage based insurance (a.k.a. Telematics) is that the insured’s premium is based on his/her actual driving behavior as captured by a device that is plugged into the vehicle and transmits data about driving habits to the carrier.

At least 18 states have 4 or more Personal Auto programs implemented, and 49 states have at least 1 program implemented.  In December 2012, Strategy Meets Action released research findings that about 70% of carriers have a UBI program in place, in pilot, or under consideration.  It was noted that if UBI captures only 10% of the market by 2020, 25 million cars will be insured through some type of UBI program.   If UBI captures 20-25% of the market, carriers without UBI will see the impact of adverse selection on their current book-of-business.

So what kinds of customers are carriers targeting, and if UBI takes hold of the market as promised, who will be left in non-UBI programs?

The obvious answer to the first question is safe drivers – the very slice of the market that every carrier wants to attract and to retain.  Progressive has released findings from its detailed analysis of 5 billion driving miles that demonstrated that drivers with the highest-risk driving behaviors have loss costs that are approximately 2.5 times the loss costs of drivers with the lowest-risk driving behaviors.   By targeting these lowest-risk drivers with special discounts, carriers attract the best of the best while improving their overall book of business.  Once a safe-driver is enrolled in the program, the special discounts also improve retention because the discounts get larger.  Given the proprietary nature of the driving behavior data that the carrier has collected, it is much harder for another carrier to match or beat that price point.

Beyond the safest drivers, there are other market niches that are well-suited to UBI programs. Consider the household with teen drivers or with aging drivers. UBI is an attractive product because it offers a way to monitor driving behavior among higher risk drivers within the household, and the very act of monitoring driving behavior and the feedback mechanisms have been shown to improve their driving behaviors. UBI programs are also a good fit for households where one or more vehicles see little use. With a growing cadre of telecommuters in the workforce and growing numbers of retiring baby boomers, how many vehicles sit parked for days at a time, especially during peak drive times?  Even if these drivers aren’t among the safest of drivers, their limited usage mitigates their exposure. Finally, consider the driver who has had 1 or 2 tickets or 1 or 2 accidents but is convinced that he/she is a safe driver; they were just unlucky. A UBI program allows these drivers to prove that they are safe drivers, lowering their rates and allowing the carrier to capture a truly safe driver that other carriers write-off as accident prone. At worst, a UBI program ensures that these drivers will pay rates based on their actual driving behavior, and the feedback loop provided with the programs can actually improve their driving behavior.

So who is left?   The drivers left outside a UBI program fall into two categories – those who could benefit from a UBI program but haven’t made the switch yet, and those unsafe drivers who would be penalized by entering a UBI program.

As better drivers join UBI programs, the majority of drivers in non-UBI programs will reflect poorer driving habits and much poorer claims experience. Carriers who offer only non-UBI programs will see their loss ratios deteriorate which will force rates higher. However, this will simply give the remaining safer drivers an even greater incentive to switch to carriers with a UBI program.  The market will bifurcate and carriers without a UBI program will find themselves essentially managing a book-of-business that is focused on non-preferred business.

The later that a carrier chooses to launch a UBI program the harder it will be to capture desired market share. At this point, the driving behavior associated with these programs is proprietary to the carrier.  While that may change in the future, it is currently impossible to purchase a driving score in the same way that a carrier purchases a credit score for a prospective insured. Therefore, once a driver is tied to a carrier’s program, it will be difficult to lure that driver to another program because the new carrier won’t know nearly as much about him/her as the current carrier.

The questions that remain are: how quickly will customers embrace these programs; how quickly will this change happen?   UBI programs have the potential to upend the Personal Auto market in much the same way that the introduction of credit scores did.   Will 2013 be the year that we begin to see real evidence of this coming trend?

Customer Intelligence – Leveraging Social Media to Improve Customer Satisfaction

LoyaltyCustomer satisfaction for Property and Casualty (P/C) insurers has been on the slide over the past few years for many reasons, but most notably due to increased premiums driven by natural catastrophes.  Carriers can work to offset these premium increases by improving upon the intangible values policyholders receive, such as customer satisfaction.  Improving customer satisfaction can be supported by improving upon Customer Intelligence.  Customer Intelligence is the process of collecting relevant and timely information about customers and prospects, consolidating the data from all the different sources into a cohesive structure and providing the sales, service and marketing with tools that can leverage this intelligence.

Insurers must begin to look at ways to respond to customer needs outside the old fashioned methods of phone and email, and embrace the social media outlets.  Most carriers look at social media as a marketing tool but used well, it is much more of a relationship, loyalty and service tool.  Many carriers already have a Facebook page and Twitter account to disseminate information and respond to complaints posted directly to them, but the most damaging words are those posted where the carrier does not respond because they do not even know they exist.  Integrating with social monitoring tools can help carriers avoid these situations, creating a competitive advantage.

Carriers need to be able to serve their customers in the channels they wish to be served in, and helping customer service representatives to address issues early, before they become a costly live call or a crisis, can decrease CSR expenses.

The first step to monitoring social media is actively listening, using tools that provide real time alerts on relevant mentions, questions and discussion topics that should be responded to, then route them to the appropriate responder.

Imagine how impressed a customer will be, when they are contacted in response to a tweet that was posted after a bad claims experience.  Carriers can capitalize on opportunities to turn negative feedback into positive, if they take advantage of the chance to make things right with the customer.

In addition to providing this service level response involving their own interests, carriers can extend this service to assist their top tier agencies as well, and educate them on the proper way to interact online.  While policyholders may jump carriers, they are generally loyal to their agency, and if carriers can help protect their agencies, they may find more, and better, risks on their books from those agencies. Conversely, it can also provide an opportunity for carriers to rethink some of the agencies they work with, if they consistently find negative feedback about them related to their support of their policyholders.

With carriers and agents working together, marketing executives can provide management with overall reports on social media sentiment, issues and the activity metrics for agents and their customer service organization.

This is the initial step of a broader goal to create a robust Customer Intelligence framework that allows P/C insurers to listen, connect, analyze, respond and market to customers in a much more proactive and targeted way, leveraging the new communication channels Social Media provides.

The next step becomes tracking this information within the carrier’s CRM and linking with customers’ Twitter names or Facebook accounts, to help CSR agents get a complete picture of the customer.  CRM projects are expected to be near the top of the list for many carriers in 2013 that look to get out ahead on this front and gain a better of understanding of their current customers, and the customers they are going after.

Why do Carriers feel the need to turn to Analysts for key decisions such as PAS replacement?

I have been pondering this more and more – I mean the sell prop seems so good at the onset. An Analyst firm is agnostic, so we are lead to believe, they spend every waking moment researching the exact topic, they do countless rfps and they promise to be right by your side all the way to….that’s the nub isn’t it, to the end of the selection. So let’s not even think about the fact they do not have to live with the decision let us really focus on the value prop.

So we look to an analyst because all they do is research topics like PAS replacement or legacy moderization, and that seems to me to be yet another problem — if you never actually go through the whole process how can you truly have a full understanding? I am not talking about asking carriers and CIOs about lessons learned; I am talking about learning them for yourself and having the key knowledge to really know how the “theory” reacts in the “real world”.Let’s take a fun example – if you decided one morning to reenact William Tell with modern weapons, who would you want to take the shot……shall we review the candidates?

Candidate 1) A man that analyzes weapons every second of every day, he knows every single moving part, the exact interactions, the kick, the muzzle velocities, heck he even talks to sharp shooters about the guns longevity, it’s reliability and confidence….seems to be the perfect candidate – he knows everything with the one exception of ever actually aiming and pulling a trigger.

Candidate 2) A US Army Ranger sharp shooter, he knows all he needs to know about the weapon, he may not know the exact rifling pattern but he does not need to he has something different; he knows exactly how the weapon reacts, the wind, the elevation and air pressure, the distance and drop of flight – he knows where the bullet will end up in the real world, not on paper.

So forget the original question – let’s have a new one – you are an Insurance CIO with an apple on your head and a lot to lose, who takes the shot at the apple? Who do you choose? Interesting thought…….

Does Claims BI Just Mean “Bodily Injury?”

Anyone in the insurance claims industry that works on BI is not talking about Business Intelligence. Rarely is BI ever applied in insurance claims to mean business intelligence because most carriers only use business intelligence generically to examine closure rates, expense payments, and contact rates. Business intelligence is most often used primarily to analyze data in other business units like agent performance, product profitability and policy discounts.

By properly applying business intelligence and measuring analytics in the claim handling process, carriers have the opportunity to review and grade adjusters for improvement and development of claim adjudication best practices. Monitoring and reviewing claim handling practices will ensure adjusters are performing quality investigations resulting in fair and proper claim settlements for the carrier and the insureds.

A claim is the core of why people purchase insurance products – to get reimbursed when they incur a loss. A claim becomes a personal touch point with the insured, as well as a prospective insured when third parties are involved. How many carriers have used claimants switching to them after a claim to advertise their service? Leveraging analytics to generate business intelligence on claims processes, insured retention, and claimant satisfaction, as well as measuring things like allocated loss expenses, the number of claimants with attorneys, and post closure actions, can be used more directly and efficiently to impact the success of claims handling.

Of course you may not want all of your insureds since there are those that are working to use insurance claims to make money. Properly applied analytics and techniques can detect patterns and trends in claim participation, injuries, supplemental repairs, etc. I know of one specific case where analytics found that a claimant was paid five times for a single leg amputation, and another where a doctor was treating an average of 1,600 patients per day. Business intelligence can also capture the effectiveness of independent medical exams on claim settlements, better understanding and control on reserves, back to work rates, and therapies to move claimants from total disability to partial disability.

The next logical step is moving into predictive modeling.  Properly applied claims analytics helped one western insurer realize their return on investment in a matter of months, when they could proactively augment and deploy needed field staff to respond to several catastrophic storms.

By improving best practices, identifying fraud early, and employing predictive modeling, not only will customer satisfaction be effected, but this will also trigger claims closing more quickly and at lower costs, increasing the number of claim files adjusters can handle and lowering loss ratios. In this tough economy, lowering loss ratios by even as little as 1% can have a big impact on a company’s bottom line.

Agent Mobility As A Customer Touch Point Opportunity

Agents still say ease of doing business is the key to working with a carrier.  But that means different things to different people, and certainly different things between agent and carrier.  For years carriers have been working to streamline operations within their organizations to make life easier for agents.  Recognizing and implementing standardization such as the use of ACORD forms for applications was an initial step.  Then there was integration between the carrier’s systems and the agency’s management systems that allowed agents to submit applications through online integration.  Finally came the age of the real time online portal where agents can log in to carrier systems and submit applications directly.  How much easier can it get than that – A LOT.

All of these technological advancements are offered by almost every carrier.  So what becomes the differentiator to an agent when they can place business with multiple carriers?  It’s still ease of doing business.  Which carrier allows me to get a quote the easiest by entering the fewest data points and then complete that application and close the business fastest?  Many agents try to close business in volume because more volume means more premiums, which means more commission.

Most of this work is done by agents within the confines of their office.  They can make visits to customers and prospects to talk about other offerings, but then many have to make a follow up appointment to review the quote requested in the meeting.  How about the chance encounter in the supermarket or the church social when you don’t have a computer with you?  This is where insurance agent mobility comes in.

The ubiquitous smartphone is always available and at the ready within its holster.  There are many carriers, such as Amica, Nationwide and Travelers, that have developed smartphone apps for insureds, but not as many allow agents to access information that way.  MassMutual, as an example, developed E4 (Electronic Enhanced Enrollment Experience) which allows agents to enroll retirement plan participants entirely over their smartphone.

If I can check in to, or change my flight on a mobile web site for an airline using my smartphone, shouldn’t an agent be able to get a quick quote for a prospect, file an endorsement for an insured, or even bind coverage and email the policy documentation to their customer?  Imagine the response by the insured to the agent when after about a 2 minute conversation, the newly insured’s phone beeps because the email with all the policy documentation just arrived in their inbox.

Wow, that was easy.

This is a major opportunity, not only for the agent, but also the carrier, to utilize the latest technology to make things easier not only for the agent, but the insured.

Technical Debt – Managing near term technical “borrowing” to prevent bankruptcy

In my recent client engagements, I’ve discovered that increased flexibility (in product development / deployment, mobile capabilities, back office integration, etc.) is still top of mind. But, as organizations weigh options for meeting their specific business needs, tailored, custom build efforts may be required when system replacements or refacing/modernizing front ends fail to meet long term business objectives.

Often times, proposed modifications are defined to bolster existing systems as a short term, quick win solution, until a more permanent solution can be afforded.Carriers who elect to undertake custom build efforts in-house are faced with balancing the following resource challenges:

  1. Retaining full-time resources with sufficient expertise in both initial custom development and ongoing maintenance efforts.
  2. Enlisting external consultants who have both System Development Life Cycle (SDLC) expertise and significant industry expertise.

Either approach drives the carrier to consider the cost of ensuring quality design and development practices against tight budgets and competing business priorities.

Although a quick fix enhancement may seem to be the cheapest route, a Software Productivity Research study from 2010 found that a patch is only less expensive through the early rounds of coding. After that, it is significantly cheaper to code — and significantly more cost effective to maintain — for the longer term solution.

Most concerning is the tendency for organizations to prioritize the short term objective without fully considering the potential long term ramifications.  I can see the value of targeted modifications to existing systems for a short term, short expected lifecycle goal.  However, it seems that regardless of the intended short term lifecycle for these “Band-Aids,” the modifications are exercised years longer than planned.  The term “technical debt” has been top of mind in many discussions I’ve had recently, where we face the challenge of helping carriers fully scrutinize their options and understand the consequences of their decisions. Carriers performing more internal development need to understand that any short cuts made for an immediate patch MUST be structurally reworked in order to repay the technical debt instigated to get the fix up and running.

For example, in one instance, an organization has been weighing options to achieve a business goal given several unknown future factors.  Options included expanding an internal system – which evolved through bolt-on requests and had become a critical system – or building these capabilities within a new system.  The technical debt factor was paramount in this case, as the expected lifecycle of the selected solution weighed in heavily.  Given the uncertain future state, a short term solution may work for a year or two, but the probability of a three+ year expectancy drives a far more strategic approach.  Any short term patches made to the existing system would become exponentially more costly to support as the system remains in use.

This doesn’t mean that there can’t be quick fixes applied to meet an immediate need, but carriers should look beyond the next quarter and evaluate their debt repayment plan before making the decision to implement a quick fix.  Nearly every carrier I’ve worked with has an internal system that grew to be a critical platform and now requires full time business and IT resources purely for maintenance alone.  As the cost to maintain such a system grows, so does the cost to replace it. Carriers must consider the true long term benefits and ramifications of their development efforts and make strategically sound decisions to meet both short term needs and long term business goals.

Don’t Let Your Enterprise Overhaul Plan Implode Like the Red Sox….A Disgruntled Fan Vents

You have your architecture design all laid out; the proper resources have been secured and contracted for the duration; the development starts off a little rocky, but quickly smooths out, and you’re sailing along through the project.  Everything’s firing on all cylinders while you’re blowing through all the deliverables with ease, and you can see the potential success coming; you near the end of the project in System Integration Testing – when it all falls apart like the 2011 Red Sox.

On paper, the project plan looked flawless with plenty of time allotted for each stage, including contingency.  Your Agile development method had been tried and tested, and everyone understands his or her role.  You can do everything right to position your company for success, yet fail in the execution.

There are many factors that contribute to the success or failure of a project:

  • Focus and Concentration
  • Expertise
  • Reserves
  • Communication
  • Team Chemistry

It all starts with focus and concentration.  A system replacement project is a full-time job, and if people become distracted by other issues, such as production support responsibilities or competing projects, those distractions impact the quality and timeliness of the system replacement. Just like a pitcher who’s distracted by off-field issues or his next contract can start throwing meatballs, your project resources can be sucked into other issues and neglect their tasks at hand.

Aligning individuals with the correct task for their skill sets is key.  It’s difficult for a project to be successful if resources are overwhelmed by learning new technology. Confused employees beget faulty implementations that must later be fixed or replaced. If a player’s used to playing center field, and you stick him in left with a large wall behind him and much closer to home plate than he’s accustomed to, you’ll be stuck with defensive problems that cost games.  Similarly, it’s also important to have depth and reserves available to fill-in.  Should resources be unable to complete the work, you need competent people available to step in and allow the project to continue without causing a misstep.  If one of your best young pitchers goes down with a back injury, or your “All Star” third baseman is sidelined with a hernia, you need to have people available in AAA who can step in and hold their own to keep things moving in the right direction.

I love the Agile development methodology.  There’s constant communication – everyone meets every day, short sprints of development and delivery meetings, easy to follow tracking reports on tasks, publicly displayed reports on progress – everyone knows what’s going on. Constant communication yields accountability and support. If people see that they may be lagging behind, they’ll put in more time to compensate. If others are ahead of schedule, they may be able to help those whom are lagging. However, the danger is that if one group does lag behind, it can also draw others into that quicksand. They may say, “If the others are behind and no one cares, why should I kill myself to get my own work done?”  Therefore, it’s important to keep everyone motivated with accountability and let everyone know where everything stands.  This methodology also applies to enterprises as a whole.  If your pitchers are throwing so poorly that they can’t get past the fourth inning, it can create derision in the clubhouse. Your DH might start telling players, “If you can’t get the job done, we’ll have to play relievers instead.”  Or, if your new “star” left-fielder can’t get on base and use his speed to score, you need to communicate to the team why those players are still in those positions.  The oft-quoted definition of insanity is “doing the same thing over and over again and expecting different results.”

Not enough can be said about team chemistry.  Team chemistry is most important when the chips are down.  That’s what helps get you out of the doldrums and put you back on top of your game.  The team needs support from management, not only in providing the proper tools to accomplish their tasks, but also to let off steam for a respite and work together on something completely different.  Take a Friday afternoon off for the team to play volleyball on the back lawn with a BBQ lunch, or a laser tag session to get their minds thinking about something else and staying fresh.  In order to achieve success, everyone must pull together.  Get them to socialize with each other and build that rapport where they want to support each other.  Keep everyone working closely, lock them in the same room if you can, because that will help build those close relationships amongst the team.  You can’t have everyone only concerned about their performance and not working together.  You can’t have 25 guys-25 cabs.  When it gets to the end and you’ve lost 19 of the last 24 games, there’s no character there to save you.  Team members will give up on each other and graduate to a self-fulfilling prophecy of loss.  A player might say, “If pitching lets up another long ball, I’m not going to try my hardest to catch the ball.”  The defense gets lazy, balls aren’t played properly, and more runs score.  In those situations, you need to “Cowboy Up” and do whatever you can to win.  You need to cheer for each other and not expect the worst to happen.  If you expect the worst, you’ll make it happen.

Simply putting the plan together doesn’t mean it will be successful. You have to do all things well in order to make it happen and achieve success.

(Personally, this blog entry has been very cathartic.)

CRM for Insurance — Creating a Facebook network or just another MySpace?

As I travel around the country meeting with dozens of both Life and Annuity and Property and Casualty insurance firms, I am seeing two all too common themes:

  1. A majority of insurance firms are talking about the business value a CRM solution could bring to their enterprises
  2. These firms are talking, not taking any action

That being said, a few have dipped their toes in the water, usually just to manage one piece of agent or insured data, with limited or no system integration, and thus limited user adoption.  Others are taking a bit of a different tactic, in that they agree they need a central place for agent and insured information, but are focusing on aggregating that information in some form of a data warehouse.  This type of solution tends to result in very few workflow capabilities or any sort of action, because it is by design an area where data is sent and manually manipulated and analyzed for some sort of action to be taken later, utilizing yet another system.

This brings me around to the critical question: is a CRM solution for the insurance industry a Facebook network or just another MySpace?

The answer, from my perspective, lies within the occurrences above. The insurance industry tends to create siloed areas where  information resides, in  this case, either an unintegrated CRM system or a data warehouse with some sort of reporting technology on it.  If this practice continues then I believe CRM will go the way of MySpace, like so many   hot topics and big  ideas, and just fade away.

In order to make CRM the Facebook type success it could be in the insurance industry, the industry itself needs to take on some of that Facebook mentality.  I am not suggesting we start sharing our photos and weekend plans….. Instead, we give CRM a successful future by integrating it with multiple systems to create a centralized place to host a 360 degree view of the individual insureds. Insurance firms can then layer on Agent information and link their book of business by “friending” (or utilizing the multiple hierarchies in CRM) to connect to their insureds and create an insurance-based social network.

Once firms have this insurance-based social network of information, the true value of CRM can be seen by utilizing workflow, reporting, marketing and mobile capabilities to drive new sales and better customer service.

What was MySpace again?

Virtualization in Insurance

The Power of a Desktop in the Palm of Your Hand

Is Desktop-as-a-Service a Subset of IT-as-a-Service?

I read this blog recently, and it prompted some reflection on the possible applications for time- and cost-saving benefits in the insurance industry.

There are two basic types of insurance carriers from an IT perspective

  1. Carriers that sell insurance and use IT to support their business goals
  2. Carriers that are an IT shop that also sell insurance.

Though these types of carriers are very different, virtualization is a concept that benefits both.  Virtualization enables carriers with smaller IT shops to effectively leverage improved support efficiencies and more flexibility and allows larger IT organizations to redeploy resources for bigger projects like core system upgrades.

“Virtual desktops,” the keystone of visualization, free a user from hardware burdens by introducing “greater synergy, efficiency, and agility.” This allows users to embrace a mobile and more flexible work style.  This versatile technology applies to a variety of scenarios. With the help of an iPad or Galaxy tablet connected via WiFi to the local area network (LAN) and radio-frequency identification (RFID) tags, doctors have all of their patients’ records at their fingertips. A similar approach benefits insurance agents when visiting customers. With mobile desktop in tow, Claims Adjusters carry their office with them, and Underwriters spend more time in the field reviewing referrals with Agents.

Desktop-as-a-Service as a Subset of IT-as-a-Service has its own benefits. With virtual desktops, new users easily and quickly enter an established network with their own legacy systems already on their desktop.  It becomes easier for an agent to catch a plane to another office, log in, and there’s his desktop, ready to provide personal office functionality.

Lastly, as a part of efficiency improvements, virtualization minimizes the cost of hardware upgrades not only for those of whom work remotely, but for all users in an office.  Because all applications run on servers, users operate smaller systems without a large hard drive and processor.  In addition, any application and operating system problems users experience are addressed without requiring IT to visit the remote machine.

Sorry, Nick Burns the computer guy! You’ll be out of a job.